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Setting up an offshore company that moves your current business to foreign location is a necessary step in protecting your business or personal assets."!Forming an offshore company as it is a completely legitimate way to have your company operating under the laws of a country with business-friendly regulations. Here are some things to consider:"!" •" What myths about offshore companies should

be dispelled?"" •" Who should set up an offshore company?" " •" What sort of company should you set up?" " •" Where are the best locations to set up an

offshore company?"

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More than 1 million people each year turn to Nomad

Capitalist for offshore intelligence

Starting an Offshore Company"An offshore corporation can protect your business and your investments from high taxes and asset confiscation, but you have to know how to use one properly.

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Common misperceptions"!All too often the image of the offshore company industry is one of money laundering, gangsters, drug money, and villains wearing white linen suits that are never stained by the cognac they always seem to be drinking."!This couldn’t be further from reality (although your particular cognac consumption may vary) as offshore companies are simply entities that people create in order to legally take advantage of the global tax market."!Reasons why someone may start an offshore company are similar to why someone would start an offshore trust:"!" •" Protecting assets from impending litigation" " •" Shifting the tax burden imposed upon the

company"" •" Protecting the company from political unrest

and economic instability within the country of the owners"!

As you have just read, there’s no mention of drug money or anything illicit. It is simply a way that intelligent business owners choose to protect their hard work, protect their shareholders and maximize the potential profits of their business."!That said, you should make sure that your offshore company is 100% compliant in your home country. It’s not just the rules of the corporate jurisdiction you must follow; you must also follow rules determined by your personal citizenship."

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Who should set up a company?"!There are many people who would be interested in setting up a non-resident company, but only a few will truly benefit. In order to identify those who will most benefit from an offshore company I will highlight the following groups:"!" •" E-commerce or web based businesses" " •" International businesses" " •" Wills and inheritance" " •" Stock brokers and forex traders" " •" Holding property" " •" Intellectual property rights" " •" Counsellors and consultants" " •" Business people" !Let’s look at each one and explain a little bit about why they should start their own offshore company."!E-Commerce or web based businesses !The very nature of a web-based E-commerce company is one of globalization. The fact that there is rarely a ‘brick and mortar’ location for many web-based companies is even more incentive. If your customers are global, why shouldn’t your business be global as well?"!As an added consideration, pairing up your offshore company, that is already all over the world as an E-commerce entity, with an offshore bank account can help you set up a second stream of revenue."!Why is it important to have an offshore company and offshore bank account? Because the economic

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health of each country is not always on the up and up. Inflation or hyperinflation in your home country can make your money worth much less quickly. Having an offshore company and an offshore bank account can get you around this issue."!International businesses !If your company is already all over the world, finding the best offshore location to protect your interests is only natural. The owners of an international business can set themselves up through an offshore company, allowing them to make their purchases and sales through the laws of the offshore jurisdiction. The result is always better taxation."!For example, most tech companies have set up shop in Ireland. Ireland’s low 12.5% tax rate is attractive compared to nearly 40% in California, but up until recently, these companies could pair Irish companies with Netherlands companies and a domicile in a tax haven to lower their tax rate to below 5%."!That “Double Irish Dutch Sandwich” is going away, but there are similar strategies for international businesses to shift IP, sales, and other business elements around the world."!For wills and inheritance !An offshore company can often be combined with an offshore trust to create an entity which optimizes your inheritance tax laws. This is especially beneficial when you have assets in one country and you wish for someone in another country to receive your assets on your passing, or while you’re alive, as part of an inheritance."

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!After spending all your life building your company and assets, why let the government take part of it from you as you pass it along to your family? They already took plenty of your taxes, and they aren’t your kin!"!Stockbrokers and forex !An offshore company is a great way to anonymously trade stocks and shares, while also doing foreign exchange transactions. The reason why it is anonymous is because the transaction is being done under the name of a company, not the name of a person."!For the holding of property !An offshore company can be set up to hold two types of property:"!" •" Moveable property – such as your boat or

yacht"" •" Immoveable property – such as your home" !You will use an offshore company in this instance for the confidentiality involved, and for the chance to enjoy better taxation."!Finding an authority on this subject is essential as the laws around this can be difficult to navigate. Some countries do not allow for the movement of movable or immovable property through offshore companies."!There is a reason, for instance, that countries like Liberia, Malta, and other little-known jurisdictions

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are often used to register ships; they offer special advantages specific to yachts."!You should be careful when protecting domestic assets in an offshore company. US courts, for instance, can completely disregard a foreign corporation’s protections if the property inside is within the United States. Don’t think your local courts have to honor your offshore company if they don’t want to."!Transferring and holding intellectual property rights !If you own a patent or trade mark, registering it in the name of an offshore company can allow you to buy and sell these rights. Having these registered under an offshore company also makes it easier to grant these rights to third parties."!Counsellors and consultants !Many counsellors and consultants who set up an offshore company find it easy to manage their company through them than their onshore counterparts. This is due to different, or relaxed, bookkeeping and reporting needs. They also enjoy the taxation benefits of the jurisdiction they choose to set up their offshore company in."!Business people !Individual business people can also set up their own offshore company to create a simple and stable administration for themselves. This is especially beneficial when you need to prepare for a new activity in a hurry as you do not have to deal with an

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infrastructure build that is complicated and time consuming."

Types of companies"!There are five basic types of offshore companies that you can set up:"!" •" IBC – International Business Company" " •" PLC – Private Limited Company" " •" LLC – Limited Liability Company" " •" GBC – Global Business Company" " •" SÀRL – Société à responsabilité limitée

(French) or Sociedade anónima de responsabilidade limitada (Portuguese)"!

Each type has its own unique strengths and appropriate uses. Some are only available in certain offshore jurisdictions, and we’ll look at that now."!IBC – International Business Company !This type of offshore company is much like a private limited company. It will have shares and share capital, but these shares are not publicly traded. There will also be a board of directors, just like a private limited company. Of note is the fact that an IBC is not allowed not engage in business within the jurisdiction where it was incorporated."!There are countless numbers of IBCs around the world as it is the most common type of offshore company. The reason why there are so many IBCs is because of all the benefits this type of offshore company features:"!

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" •" Few restrictions are imposed upon your business activities."

" •" They typically only require 1 director and shareholder. This can be one single person or company in total if you want to set it up that way."

" •" There are typically no audits. While you are typically supposed to keep books (and you may well need to for your home country), these books are usually not audited."

" •" No taxation, just a fee that is somewhere around $100 – $500 USD per year."!

You can use a wide variety of suffixes for your IBC depending on the jurisdiction: Ltd, S.A., Corporation, Corp., Inc, and Incorporated are all possibilities. You may not be able to name your offshore company by all of these names in every jurisdiction."!Another instance in which you’ll want to speak with a professional offshore expert is when it comes to choosing which jurisdiction to start your offshore IBC. This is because Anguilla, Seychelles, St. Vincent, Nevis, Belize, Bahamas, and Dominica, each have particular legislation in place around offshore companies and IBCs."!PLC – Private Limited Company !This is the second most popular type of offshore company. This is due to the confidential nature of them not being as high as it is with an IBC. You usually have to keep records, prepare accounts, you could be audited, and there is occasionally a very low tax rate involved."!

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Although these barriers can be worked around by having the corporate entity as an IBC and using nominees, corporate directors or shareholders."!Some non-resident jurisdictions have their own local variation on the PLC. Luxembourg, Monaco, Lebanon and Switzerland have the Société Anonyme (S.A.). Panama, Costa Rica and Uruguay have the Sociedad Anónima (S.A.). Switzerland and Liechtenstein have the Aktiengesellschaft (A.G.). Call it local flavor as each one is a PLC with a slightly different name."!LLC – Limited Liability Company !LLCs also have their place in the offshore world. Nevis is one example of an LLC jurisdiction. Others include:"!" •" Anguilla" " •" Marshall Islands" " •" Saint Kitts and Nevis" " •" Delaware, USA" !Three other offshore jurisdictions allow you to set up an LLC, but they have their own local names for them:"!" •" Belize, the Limited Duration Company, which

can only exist for up to 50 years"" •" Costa Rica, Sociedad de Responsabilidad

Limitada"" •" Panama, Sociedad de Responsabilidad

Limitada"!The first one is exactly like an LLC, but with a time limit on how long it may exist for. Costa Rica and

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Panama are largely the same, but they use a Spanish equivalent."!GBC – Global Business Company !This is a type of offshore company that is exclusive to Mauritius. They are available in two classes:"!" •" Class 1 GBC – This is an offshore company

that is resident to Mauritius. A tax rate of 0% to 3% is imposed. You must keep accounts and have at least one local director."

" •" Class 2 GBC – This is for non-resident offshore companies. They are nearly identical to an IBC."!

Class 1 companies are able to take advantage of Mauritius’ double taxation agreement, making them attractive for those with business ties to countries that have tax treaties with Mauritius."!Labuan in Malaysia has a similar company offering (though not GBC) that allows companies to pay a low flat tax outside of the traditional Malaysian tax system, all while availing themselves of certain Malaysian tax benefits internationally."!SÀRL – Société à responsabilité limitée !The French developed their offshore trust and offshore company system differently as they were not part of the basis of trust law – English common law. The SÀRLs that the French built were based on the German Gmbh, and are similar to the structures of the UKs Private Company Limited by shares, and the American Limited Liability Partnerships."

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!The Portuguese later adopted the concepts of SÀRL and named it Sociedade anónima de responsabilidade limitada. You can now also find SÀRL offshore companies in Lebanon, Luxembourg, Switzerland, Madagascar, Algeria, Macao, and Monaco."

The best country to choose"!Before we start looking at the countries themselves, there are a few key questions that you need to ask first:"!" 1" Does the country have a reliable means of

communication between it and where you are located?"

" 2" Does the country have political and economic stability?"

" 3" Is the country known for having a good reputation within the offshore company industry?"

" 4" Are there sophisticated corporate laws within the jurisdiction?"!

Choosing an offshore jurisdiction that doesn’t meet the highest standards can hurt your profits and possibly be no better than starting your company onshore."!You must consult with an expert in the offshore industry in order to protect yourself."!" •" Nevis. Stability, no records requirement; good

reputation"" •" Seychelles. Low fees, no public data sharing,

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" •" Belize. Strong privacy laws, low fees, English speaking; average reputation"

" •" Hong Kong. Politically stable, financial center, good banking, transparent; excellent reputation"

" " The list above is speaking generally. For the best advice it is essential to schedule a professional consultation. We also provide in-depth coverage of a wide range of jurisdictions to Members of our premium Membership, The Nomad Society."

How do taxes work?"The answer to this all comes down to which jurisdiction you choose to start your offshore company in. To speak in general terms, you’ll have to pay either no tax, or very little, as this is one of the main advantages of an offshore company."!There are jurisdictions which will make it mandatory for your offshore company to have yearly accounts that are audited. Four examples are Hong Kong, the UK, Gibraltar, and Cyprus."!Regardless of whether or not you’re going to be taxed within the jurisdiction of your offshore company, you will still need to speak with a tax advisor or expert to determine what your obligation is to your local government."!It is important to note that there may be some benefit to paying a little tax. Setting up shop in Ireland won’t draw any “red flags” the way setting up shop in Seychelles will. Certain jurisdictions have a bad reputation and you may have trouble opening bank accounts outside of that country."!

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Singapore, Hong Kong, and Ireland are all worthwhile choices for companies that need a high-end image that is hard to come by with a company based on some far-flung island. These countries aren’t traditional “offshore” jurisdictions but offer many benefits of a tax haven without the stigma."

Other things to avoid"!There are plenty of people who will sell you on strategies that are illegal, outdated, or flat out don’t work. These people cater to your fear and/or greed and claim what they offer will solve your problem. However, avoid these claims:"!• Bearer shares. Bearer shares are the concept of

physical shares in which whomever holds the shares, owns the company. As you can imagine, this setup is a nightmare for anti-money laundering, so most countries have phased them out. Only a few countries allow bearer shares that are registered, which effectively makes them useless anyway."

• Nominee directors and shareholders. Most of the time, using nominees will just cost you money. Any bank you work with will demand to know the “beneficial owner” of the company, so adding fake shareholders or directors won’t do you any good. Countries are also increasing pressure on nominees to turn over the names of their clients."

• Anonymous companies. For the reasons above, they simply don’t exist. Don’t believe the hype."

• Low cost companies and banking. Going offshore will cost you a little money. You not only need to hire a professional, you might want to seek tax advice for your home country’s rules. Meanwhile, offshore banks may require more

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documents and impose higher fees than your home country’s banks. Fee-free offshore is not a reality.

Get 1-on-1 help for your needs"!There’s a reason more than 1 million people annually visit Nomad Capitalist for help internationalizing. That’s because we offer unbiased advice based on your personal needs."!Andrew Henderson, editor of Nomad Capitalist, offers personal consultations in conjunction with our pre-screened network of lawyers to help you."!If you are interested in booking a consultation or done-for-you service, or need a referral, please email andrew@nomadcapitalist.com.

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